The UK economy has stumbled from crisis to crisis over the past decade, including the divisive 2016 public vote to leave the European Union, the pandemic and then a bout of inflation that has seen prices in Britain rise more than in France and Italy.
The population of the UK rose about 5% between 2015 and 2023, with official projections suggesting a further 1mn people have been added since then.
UK economy outperformed other Group of Seven nations with growth of 1.1% in the first half of the year, yet did slightly worse when adjusted for the population.
Per capita output was barely higher in the second quarter than before the pandemic, whereas the economy as a whole is about 5% larger.
Business investment fell by 4% from the first quarter and household spending growth was weak.
The UK economy has lost its edge over Italy and slipped further behind France over the past decade, according to per head gross domestic product figures that reveal a stark underperformance fuelled by a population surge, high inflation and tepid growth.
The findings will ring alarm bells in Keir Starmer’s government, which is looking at how much the economy generates for each resident rather than aggregate output as a gauge of the living standards it has pledged to improve.
Italy, long a symbol of European economic stagnation, has almost completely closed a gap with the UK that was around $4,000 per head just before the 2016 Brexit vote, International Monetary Fund data based on purchasing power parities show.
Back then, the UK was also roughly level with France. Now, with a per capita output of $54,556, Britain is estimated to be just $500 ahead of Italy and almost $1,700 behind France.
Britain’s economy is still suffering from long Covid, says some experts.
The unmatched spike in public debt, the 1.2mn extra people on sickness benefits, the record tax burden, the bulging size of the state and — above all — weak economic growth are the lasting symptoms of decisions taken during the pandemic.
While a post-pandemic burst of inflation has abated across much of the developed world, Britain is still stuck with the highest price growth among big western economies.
Granted, consumer price inflation (CPI) is now far below where it was in late 2022, when it maxed out at 11.1%. That’s after the Bank of England aggressively ramped up benchmark interest rates from almost zero in late 2021 to 5.25% in 2023, sucking money out of the economy by hammering the purchasing power of borrowers.
But it is back up again, with consumer prices climbing by 3.6% in June, up from 2.6% in March, leaving the bank with plenty of work to finally reach its 2% target, according to a Bloomberg report.
Many economists say they believe Brexit has its fingerprints on the inflation troubles.
Research by the London School of Economics suggested that a third of UK food price inflation from the end of 2019 to March 2023 was caused by Brexit because extra border costs added £7bn to grocery bills.
Cautious British households are more inclined to save money than at any point since the run-up to the global financial crisis, according to a recent survey of consumer sentiment.
Amid mounting job losses and rising inflation in the UK, GfK said its overall consumer confidence index slipped one point to minus 19 in July, partially reversing an improvement the previous month.
It adds to growing evidence of the economic impact of the Labour government’s tax-raising budget and a spate of increases to household bills.
Chancellor of the Exchequer Rachel Reeves is heading into a difficult autumn budget as economists make a common prediction: tax rises are in store.
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